Business Combinations

12 Months Ended

Sep. 30, 2013

BusinessCombinationsAbstract

BusinessCombinationDisclosureTextBlock

20. BUSINESS COMBINATION

Acquisition of Assets from the Acro Group

On February 8, 2013, IES Renewable Energy, LLC (“IES Renewable”), an indirect wholly-owned subsidiary of the Company, entered into an Asset Purchase Agreement with a group of entities operating under the name of the Acro Group: Residential Renewable Technologies, Inc., Energy Efficiency Solar, Inc. and Lonestar Renewable Technologies Acquisition Corp. (collectively, the “Acro Group”). Pursuant to the terms of the Asset Purchase Agreement, the Company agreed to acquire certain assets in connection with the Acro Group’s turn-key residential solar integration business (the “Acquired Assets”). The Acquired Assets include, but are not limited to, assets relating to the Acro Group’s solar installation sales and marketing platform and the backlog of contracts entered into by the Acro Group with residential solar customers, which provide for the payment of sales and marketing fees in connection with the sale, installation and third-party financing of residential solar equipment. The transaction closed on February 15, 2013 (the “Closing Date”).

Following consummation of the transaction, IES Residential, Inc. (“IES Residential”), a wholly-owned subsidiary of the Company, began offering full-service residential solar integration services, including design, procurement, permitting, installation, financing services through third parties and warranty services for residential customers.IES Residential had previously provided solar installation subcontracting services to the Acro Group, and as of February 8, 2013, was owed $3,800 for subcontracting services provided up to that date (such balance, as of the day prior to the Closing Date, the “Accounts Receivable Balance”).

Total consideration received by the Acro Group for the Acquired Assets consists of (i) IES Residential’s release of the Accounts Receivable Balance, (ii) payment by IES Renewable to the Acro Group of a percentage of future gross revenue generated from the Acquired Assets in an amount not to exceed $2,000 over the 12-month period beginning the first full month following the Closing Date, subject to certain reductions as described in the Asset Purchase Agreement, and (iii) $828 representing amounts paid by IES Residential, to the Acro Group to fund certain of its operating expenses between January 4, 2013 and the Closing Date.

Purchase price and fair value of assets acquired and liabilities assumed

The Company accounted for the transaction under the acquisition method of accounting, which requires recording assets and liabilities at fair value (Level 3). These Level 3 fair value assessments were measured based on a third party valuation, utilizing methodologies including discounted cash flow, replacement cost, and excess earnings, which are subject to finalization. The total estimated purchase price was allocated to the tangible assets and separately identifiable intangible assets acquired and liabilities assumed based on their fair values on the Closing Date.

The valuations were derived based on assumptions made by management. While management believes that its assumptions underlying the valuations are reasonable, different estimates and assumptions could result in different values being assigned to individual assets acquired and liabilities assumed. The fair value of assets acquired and liabilities assumed on the Closing Date is as follows:

IES receivable from the Acro Group as of December 31, 2012 (a)		$	2,263
IES deferred cost recorded in connection with transactions with Acro Group between January 1, 2013 and February 15, 2013			1,042
Cash purchase consideration			828
Fair value of contingent consideration (b)			665
Total consideration transferred		$	4,798
(a)	As of the Closing Date, IES had a receivable from the Acro Group from past transactions between the two companies. This receivable was forgiven by IES as a portion of the consideration paid to acquire the Acro Group assets and liabilities.
(b)	The contingent consideration is based on a formula of the Acro Group's revenue for the first 12 months after February 15, 2013, with a maximum and minimum amount payable by IES.

Total estimate of consideration expected to be transferred				4,798
Fair value of assets acquired and liabilities assumed:
	Trade receivables		$	317
	Prepaid commissions			46
	Inventory			16
	Property and equipment			40
	Order backlog			350
	Covenant not-to-compete			140
	Developed technology			400
	Vacation payable			(26)
	Customer incentive payable			(70)
	Deferred revenue			(600)
Goodwill: (c)			$	4,185
	(c)	The goodwill is attributable to the workforce of the acquired business and other intangibles that do not qualify for separate recognition.

Acquisition of MISCOR

On September 13, 2013 we completed the acquisition of 100% of the voting equity interests ofMISCOR Group, LTD (“MISCOR”), a provider of maintenance and repair services including engine parts and components to the industrial and rail services. MISCOR operates in locations in Indiana, Alabama, Ohio, West Virginia, and California. Following the consummation of the transaction, MISCOR was incorporated as the sole component of our Infrastructure Solutions segment.

Total consideration received by MISCOR shareholders consisted of 2,795,577 shares of IES common stock valued at $11,853, combined with cash totaling $4,364.

Purchase price and fair value of assets acquired and liabilities assumed

The Company accounted for the transaction under the acquisition method of accounting, which requires recording assets and liabilities at fair value (Level 3). These Level 3 fair value assessments were measured based on a third party valuation, utilizing methodologies including discounted cash flow, replacement cost, and excess earnings, which are subject to finalization. The total estimated purchase price was allocated to the tangible assets and separately identifiable intangible assets acquired and liabilities assumed based on their preliminary estimated fair values on September 13, 2013.

The valuations derived from estimated fair value assessments and assumptions used by management are preliminary pending finalization of certain intangible asset valuations. While management believes that its preliminary estimates and assumptions underlying the valuations are reasonable, different estimates and assumptions could result in different values being assigned to individual assets acquired and liabilities assumed. This may result in adjustments to the preliminary amounts recorded and goodwill, which could be material. The preliminary valuation of the assets acquired and liabilities assumed as of September 13, 2013 is as follows:

IES Common Shares (2,795,577)	$	11,853
Cash purchase consideration		4,364
Total consideration transferred	$	16,217

Total estimate of consideration expected to be transferred			$	16,217
Fair value of assets acquired and liabilities assumed:
	Trade receivables		$	4,925
	Prepaids			532
	Inventory			7,530
	Property and equipment			5,355
	Customer relationships			2,100
	Technical library			400
	Trade names			1,200
	Other assets			552
	Trade payables			(4,143)
	Accrued liabilities			(2,016)
	Term loan			(5,511)
Goodwill: (c)			$	5,293
	(c)	Although this goodwill is not deductible for tax purposes, we acquired tax basis of $8.6 million in goodwill and intangible assets recognized by MISCOR prior to our purchase agreement with them. The deferred tax asset associated with the basis is fully offset by a corresponding valuation allowance. No value was assigned in the purchase price allocation above to the original intangible assets recognized by MISCOR prior to our purchase agreement.

Unaudited Pro Forma Information – 2013 Acquisitions

The following unaudited supplemental pro forma results of operations include the results of each of the companies acquired during year endedSeptember 30, 2013, described above as if each had been consolidated as of October 1, 2011, and have been provided for illustrative purposes only and do not purport to be indicative of the actual results that would have been achieved by the combined companies for the periods presented or that may be achieved by the combined companies in the future. Future results may vary significantly from the results reflected in the following pro forma financial information because of future events and transactions, as well as other factors, many of which are beyond IES’s control.

The unaudited pro forma financial information reflects certain adjustments related to the acquisition, such as the recording of incremental depreciation expense in connection with fair value adjustments to property and equipment, incremental amortization expense in connection with recording acquired identifiable intangible assets at fair value, and the elimination of the impact of historical transactions between IES and the Acro Group that would have been treated as intercompany transactions had the companies been consolidated. The unaudited pro forma financial information also includes the effect of certain non-recurring items as of October 1, 2011 such as $3,034 in acquisition related costs incurred during the year endedSeptember 30, 2013. The unaudited pro forma financial statements include these acquisition related costs as if they had been incurred on October 1, 2011.

The supplemental pro forma results of operations for the years ended September 30, 2013 and 2012, as if the assets of Acro Group had been acquired and the acquisition of MISCOR had been completed on October 1, 2011, are as follows:

	Unaudited
	Year Ended		Year Ended
	September 30, 2013		September 30, 2012
Revenues	$	542,027	$	520,016
Net loss from continuing operations	$	(3,081)	$	(6,642)